Bundling Decisions by a Multiproduct Monopolist with Incomplete Information

This paper analyzes bundling decisions of a rnultiproduct monopolist facing uncertain. The monopolist sells his products using an auction mechanism and the market is as a game with incomplete information in which the buyers as well as the seller strategic agents. With a small number of buyers, a profit maximizing seller will bundle his output. This makes buyers uniformly worse off compared to the case where the same does not bundle, in the sense that any buyer is worse off regardless of his for the monopolist's outputs. With a larger number of buyers, the seller will have a to unbundle his output and "high-demand" buyers are worse off than they would if the monopolist bundled his output. "Low-demand" buyers. on the other hand. are better off when the monopolist unbundles his output, regardless of the number of buyers. Despite the fact that "high demand" buyers are the typical purchasers the monopolist's output, the net effect of increasing the number of buyers is greater efficiency since bundling creates market inefficiencies both ex post and ex ante.